It is every person’s dream to have a home of their own and it is indeed a fact that buying a home requires a huge amount of investment. The chances of being one step closer to buying a home requires you to have a close look at your credit report. A credit report is a financial statement that shows an individual’s payment history. Lenders and creditors investigate a person’s credit report since it shows a person’s financial capabilities, financial stability and payment behavior. It becomes their basis on whether they should approve you a loan or not.

Buying a home with a poor score results in paying more

Having a good credit report entails you convenience in getting prime loans and lower interest rates which allow you to make smaller monthly payments. On the other hand, a bad credit report usually translates into subprime loans and higher interest rates. The definition of a good credit report and bad credit report usually vary from lender to lender but the average “good” score for a first time home buyer would always be around 640. Moreover, some lenders aid people who have lower scores but only under certain circumstances.

Experts suggest that a person’s debt versus income ratio be one of the vital factors when being approved a loan. Lenders have a rule that the house payment should never exceed approximately 31 percent of the gross monthly income.

Here are certain aspects which have to be taken into consideration that will also help in improving your file and credit score.

• One major factor that influence your credit score is your payment history and if you are paying your bills on time.

• Amounts owed by you are another major factor. Your score can fall due to high credit card utilization or owing a lot of money on several accounts.

• Length of credit history, new credit and types of credit in use are several other factors that can create an impact on your credit report.

• It is desired to acquire your annual credit report from all three credit bureaus, Equifax, Experian and Transunion. Every U.S. citizen can acquire his or her free credit reports, once a year from each credit agency.

• Potential homebuyers should request for all three statements from the agencies and must check them for inaccuracies. In case you come across anything wrong, report it immediately to the credit bureaus.

• Lenders also investigate your credit report, and most of them make use of merged credit statements. The “blender” file incorporates public records for liens, judgments, bankruptcies and foreclosures.

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Time and again you’ve been warned against the perils and disadvantages of spending beyond your means. But did you know that there are instances wherein going over your credit limit can prove to be advantageous for the improvement of your credit score?

Follow the guidelines below to find out how:

Bring down your credit utilization to increase your credit score

Your credit report will reflect negative records if the amount of credit used is close to the total amount of credit available to you. This is because you run the risk exceeding your credit limit and may encounter problems when you begin settling the bill. For instance, a $2000 credit limit with a monthly bill of around $1800 means usage of 90% of your credit. This might lead to lowering your credit score.

Affordable and easy way to attain loans and credit

When an individual doesn’t max out all the available credit, it implies the card holder’s financial responsibility. This then reflects really well on your credit report, leading to higher possibility of being approved for a credit card, car loan or mortgage, on top of better interest rates and more manageable financial terms.

Access to emergency funds

Having a credit limit more than the usual spending amount will be a useful resource in times of need or emergency. A clear example would be when one is travelling and you need to immediately book a ticket back home. Using a credit card would prove to be immensely more convenient and more efficient.

Increasing rewards

When paying off credit card bills, remember to do so without using another credit card. Paying for recurring expenses on your credit cards will not cost you anything.

Avoid denting credit report

Getting another credit card can be a way to have more credit, butit’s better toenhance your limit on an existing card. It is said that opening a new credit card canlower credit score. Opening a new account cuts the length of credit history, while a longer history means a better grade. The average age of all your accounts play role in your credit history and have around 15% impact on your score.

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For anyone who wants to one day own their own piece of property, take out a loan to get a new car, intend to open a bank account or even simply have their eye on a new job, your credit report and how well your financial reputation is portrayed on it, may be the key to whether or not you can make it all come true.

Managing your credit is highly essential in this day and age—not only is it a reflection of your financial capability but it opens doors to a lot of privileges that those with low credit scores cannot avail of. Unfortunately, simply because we are not aware of how to manage our finances, we also end up having to suffer the brunt of its effects in our adult life. And it’s high time that you now make the effort to clear it.

Here’s how:

1. Request for your free credit report. Most state allow you to gain access to your free credit report once a year. Be sure to get it only from the there major and therefore most reliable credit bureaus, namely Experian, Equifax or Transunion.

2. Review your credit file thoroughly. Study your credit file thoroughly and make sure that it is free of errors and inconsistencies. Identity theft today is a serious and rampant crime with credit files being the most vulnerable target. Ensure that the expenses and credit shown on the document are yours and that you have not been a victim of identity theft. Should any errors or inconsistencies show, be sure to raise it immediately with the credit bureau and your creditors so an official investigation can be conducted.

3. Pay your bad debts. Your credit cards, whose records may reflect late payments or unsettled accounts, should be corrected as soon as possible.

4. Be proactive. If you think that you need more help in managing your credit and paying off your debts, be upfront and manage expectations with your creditor immediately. Most of the time, creditors will be willing to negotiate more manageable terms by which you can settle your accounts and this will also help avoid possible negative implications on your credit report.

5. Ensure that you start building good credit. Something as simple as paying bills on time counts for a lot when it comes to your financial history. Using your credit accounts and lines responsibly—not exceeding 30 percent above your available credit specifically—will definitely improve your credit score.

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In life, there are certain financial responsibilities that admittedly will cause us financial strain. Money is poured in when you go to college, get married, raise your kids, put them through good schools, not to mention preparing for medical emergencies.
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With all these financial obligations, we tend to forget something as simple as taking care of credit standings—all of which are recorded, tracked and filed in reports made by credit bureaus and are in fact very influential to your financial reputation.
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Inasmuch as credit bureaus would like to keep an accurate report, errors are bound to come up on your credit file; when it does, instead of worrying, take time to actually act on fixing the problem.
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According to the Fair Credit Reporting Act (FCRA), it is advisable for consumers to review their credit files annually given that it is used as relevant reference material for financing major purchases such as a home or a car, job references or when renting out a space. Indeed, credit scores which are calculated using credit statements play a vital part in whatever financial transaction you do.
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An amendment to the FCRA requires credit bureaus to offer free credit report after every 12 months. This means, an individual can receive a credit statement from the three agencies, specifically TransUnion, Experian and Equifax. You can avail the benefits of free credit reports to double check errors and inconsistencies. Should you come across any inconsistencies, be sure to contact the credit bureaus immediately to rectify the error. Detail the discrepancy and highlight the business name, address, contact details and other pertinent information. It goes without saying that when writing a letter of complaint, you should send the credit report and your claims with proper documentation, a letter of explanation and a clear request of your call to action.
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Once you have sent your request, credit bureaus will begin by forwarding your complaint to the concerned creditor, who then will be given five days to reply to the letter. Reporting agencies act as the middle-man between yourself and the party involved. Once the dispute has been processed, expect around 30 days for the correct information to be reflected in a revised credit statement. After the completion of investigation the credit reporting agencies will inform you about the results.
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Remember that, as with all things, errors and mistakes will happen along the way. The important thing to remember is the end goal of keeping your financial standing in top shape and ensuring that you do not damage your credit scores.
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A credit report is the basis for all of your future endeavors involving loans, mortgages or even something as simple as credit limits. Credit scores are thoroughly monitored before a creditor, bank or lending officer decides if you are financially capable to be lent money to. Logically, anyone with an outstanding record that showcases debts, mismanaged credit history or irresponsible financial behavior would likely not be able to avail of such services.

Credit scores, needless to say, are more important that one might actually think. It goes beyond mere number but a reflection of one’s character and capability to manage their finances. Take time to read through the guidelines below to ensure that you keep your credit scores up:

1. Request for a free credit report

Ask for a copy of your credit report. Everyone is actually entitled to get a free annual credit report from three credit bureaus—namely Experian, TransUnion and Equifax. Contact them once a year to keep a closely eye on possible changes and updates on your credit history and study everything in detail. If there are discrepancies in the report, make sure that you correct the information immediately.

2. Paying on time

Good credit scores is a result of responsible paying behavior prompted by making regular payment on time. If you want your ratings to improve, paying on time is the simplest and easiest way to do so.

3. Closing accounts

Upon paying off a particular credit account, most people proceed to close it. This is a mistake that actually leads to lowering of credit scores. Once a credit card is completely paid off, don’t close it—just be responsible enough to set it aside and not use it. Unused accounts help to maintain a low credit-to-debt ratio.

4. Get the right credit mix

Spotty credit reports are caused by availing of several loans at the same time. Credit agencies, while they like to see several working credit cards that have a healthy and properly managed credit record, will not want several reports that show someone availing of loans left and right. Especially if the payments on these loans are not managed properly.

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